Session 149

Resource Allocation and Portfolio Management

Track H

Date: Monday, October 12, 2009

 

Time: 15:45 – 17:00

Paper

Room: Meeting Room 3


Session Chair:
Matthias Brauer, University of Mannheim

Title: Firm Behavior and the Strategic Action of Acquiring External Resources in the Biopharmaceuticals Industry: A Multi-Level Conceptual Framework

Authors

  • Sotiris Rompas, Bridgehead International
  • Sotirios Paroutis, University of Warwick

Abstract: External resource acquisition (ERA), the strategic action to acquire critical resources, has been a core activity for firm survival. We challenge the resource-based rationale of most current ERA studies that firms’ strategic actions are solely directed by their resource endowments- and propose instead that it is top managers’ interpretations of their competitive environment driving firms to engage in ERA. We draw upon the upper echelons perspective to unpack the processes through which top managers take external resource acquisition decisions when faced with resource-related actions by their competitors. Using insights from the biopharmaceutical industry, we suggest that ERA behavior is more complex than previously assumed and develop a multi-level conceptual framework that provides firm- and TMT-level explanations of ERA patterns among competing firms.

Title: How Capital Budgeting Differs as Uncertainty and Controversy Vary: Bridging Bower and Brealey & Myers

Authors

  • Hyoung-Goo Kang, Hanyang University
  • Richard Burton, Duke University
  • Will Mitchell, University of Toronto

Abstract: Capital budgeting is a contentious subject. Financial economists emphasize NPV-like quantitative approaches, while strategy scholars have argued that socio-political conflicts interfere with financially-oriented capital budgeting methods. We bridge these competing views by extending the Behavioral Theory of the Firm, emphasizing the notions of Knightian uncertainty and controversy. Fourteen case studies of Korean Chaebols find that the financially-oriented standard capital budgeting model is common when Knightian uncertainty and controversy are low, while firms turn to Bower-like socio-political methodologies when uncertainty and controversy are high. We complete the uncertainty-controversy matrix with two other situations: high uncertainty-low controversy (the “Plausibility“ cell) and low uncertainty-high controversy (the “Negotiation“ cell). This approach helps explain variation in firms’ capital budgeting methods.

Title: Portfolio Restructuring Decision Making: The Interaction of Consensus and Comprehensiveness

Authors

  • Thorsten Kahlert, University of St. Gallen
  • Matthias Brauer, University of Mannheim

Abstract: While numerous studies have examined the performance impact of portfolio restructuring through acquisitions and divestitures their findings still remain somewhat inconclusive. One main reason seems to be that we have gained only little insight into portfolio restructuring processes in general and decision-making in particular. We argue that two so far unrelated themes in the strategic decision-making literature – consensus and comprehensiveness – are crucial to explaining deal performance. Consistent with our theoretical predictions, our data on 80 business portfolio decisions show that both factors have a direct positive impact on performance, while their interaction effect is negative. While our findings do not suggest using either comprehensiveness or consensus, they call for greater awareness that “overboarding” consensus may blunt the effectiveness of analytics and thus deteriorate deal performance.

Title: Why and How CEOs Reconfigure the Corporate Portfolio: A Process Perspective

Authors

  • Hamid Bouchikhi, ESSEC Business School

Abstract: Corporate restructuring has generated a continuous flow of research over the last three decades. Most of extant research has dealt with antecedents and/or consequences of divestitures. While they have produced divergent findings, researchers have shared a preference for longitudinal, hypothesis testing quantitative research methods. This methodological convergence has not enabled the field to hear Hoskisson et al. (1992) early call for more fine grained studies of restructuring processes.
This research deals with a special case of corporate restructuring, namely situations where CEOs undertake a simultaneous string of acquisitions and divestitures, with the intent to reengineer radically the firm’s portfolio.
We follow a grounded theory approach and seek to a) build a process model of portfolio reconfiguration and b) articulate theoretical conjectures for further quantitative testing.

All Sessions in Track H...

Sun: 13:00 – 14:30
Session 259: The State of Strategic Process Research: Critical Observations and Suggestions for the Future
Sun: 15:00 – 16:30
Session 263: Interactive Strategy Process Work-in-Progress Workshop
Sun: 16:30 – 17:30
Session 312: Strategy Process, IG Meeting
Mon: 12:45 – 14:00
Session 155: Language, Emotion and Learning in Strategy Processes
Mon: 15:45 – 17:00
Session 149: Resource Allocation and Portfolio Management
Mon: 17:15 – 18:30
Session 153: Decision Making in Strategy Processes
Tue: 10:00 – 11:15
Session 156: Realizing Strategies Through Effective Processes
Tue: 11:30 – 12:45
Session 150: Dynamic Capabilities in Strategy Processes
Tue: 14:30 – 15:45
Session 152: Innovation and Learning in Strategy Processes
Wed: 10:00 – 11:15
Session 154: Key Actors in Strategy Processes
Wed: 11:30 – 12:45
Session 151: Cognitive Approaches to Strategy Processes


Strategic Management Society

Washington DC